December 22nd, 2020 Mortgage Industry Update
The Bank of Canada announced on December 9th that its overnight lending rate will remain at 0.25%. The prime rate remains 2.45%. The Bank of Canada suggests that they will more than likely keep rates at this “effective lower bound” until 2023, as they observe the full effects of the pandemic.
Additionally this week:
– Canadian real estate brokerage Royal LePage expects home prices to rise 5.5% in 2021 to $746,100 in 2021. With the median price of a two-storey detached house and condominium projected to increase 6.0% and 2.25%, respectively, to $890,100 and $522,700.
– Canadian mortgage arrears reached their highest levels since 2017. Data from Canadian Banks Association shows that the increase took place even during the peak of fiscal aid programs. Arrears rate grew by 12.63% annually to reach 0.26% in May, highest reading since April 2017.
– Statistics Canada: The nation’s households have seen their net worth jump by more than $600B since the end of last year. This is despite the pandemic induced economic downturn. On a per capita basis, household net worth reached a record $320,441 in Q3, up $12,000 since 2019.
– RBC Economics: Household savings rate (as percentage of disposable income) shot up dramatically from pre-outbreak reading of 5.9% in first quarter to 27.5% during Q2. Over the last three quarters, household savings balances grew by around $160B compared to pre-pandemic levels.
– Filings from Canada’s largest banks showed that the vast majority of borrowers have now resumed regular payments, with just around 69,900 mortgages on payment deferral as of October 31. This represented a massive 86.3% decline from the quarter prior.
– Finder.com report: 13 of 19 economists said they believe BoC will hold at the current interest rate until 2023 or 2024. Predict only average growth (3%) in residential housing values for spring 2021, with Toronto expected to see the highest average gain (5%) during the spring.
Stay tuned for the next update!
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